Why the Government Can’t Charge More Than $10 a Gram for Legal Pot

On paper, marijuana sales may be a government monopoly after legalization, as alcohol sales largely are now.

Deficit-plagued provinces, strugglingto fund hospitals, roads and education systems, may be tempted to squeeze as much tax revenue from pot as possible.

In January, a CIBC World Marketsreport estimated that the federal and provincial governments might be able to share up to $5 billion in new revenue from marijuana taxes, ” … but only if all the underground sales are effectively curtailed.”

But pricing pot will be a delicate exercise in maximizing taxes while not driving buyers back to the black market. It doesn’t help that the black market already exists and is deeply rooted.

“They have to find that sweet spot in between,” says University of Toronto PhD student Jenna Valleriani, who studies marijuana dispensaries. “People have been purchasing off the black market for twenty years, thirty years. It’s going to be really difficult for them to walk into a store and purchase their cannabis legally.”

“On the street, the average is about $10 a gram, with that decreasing as you buy more volume,” she says. “On the medical market it’s somewhere between $6 and $15 a gram, depending on quality and the type of strain.”

To really eliminate the black market, legal pot would have to be sold for under $10 a gram, Valleriani says.